The 9th Circuit in Tillman v. Tillman, 2016 WL 3343785 (9th Cir. June 15, 2016) allowed a claimant to proceed in court after her arbitration had been terminated due to her inability to pay the arbitration fees.
The case involved a client’s malpractice claim which was stayed by the federal court after the victim was forced into arbitration. However, the plaintiff was unable to pay the $18,562.50 fee the American Arbitration Association (AAA) required to administer the claim. The arbitrator terminated the arbitration as a result of nonpayment.
Defendants asked the court to dismiss the Complaint for failure to prosecute. The court reviewed evidence and confirmed the client was unable to pay the AAA fee, but dismissed her case anyway. However, the Ninth Circuit found the district court erred when it dismissed the client’s claim. It found nothing in the FAA or binding precedent that required dismissal of the litigation. Therefore, it enforced a district court’s usual obligation to decide cases properly before it.
“Our decision that Tillman’s case may proceed does not mean that parties may refuse to arbitrate by choosing not to pay for arbitration. If Tillman had refused to pay for arbitration despite having the capacity to do so, the district court probably could still have sought to compel arbitration under [Section 4 of the FAA].”